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The Bank of Jamaica, overseer of the foreign-exchange system, reported Thursday that the Canadian dollar sold as high as $74.40 in spot trades.

Sabrina N. Gordon, Business Reporter

Jamaicans are now spending more to buy the Canadian currency than they pay for the American dollar, spot foreign-exchange trades in Kingston showing a gap of more than two dollars between the two rates.

On Thursday, Jamaicans paid a high of $72 for the U.S. dollar, while rates quoted for the Canadian ranged up to $74.40.

Still, the demand for the currency comes a poor second to the U.S. dollar.

The market spent, on average, J$213 million to buy C$2.9 million from traders in the banking and cambio systems; but spent more than ten times that amount, J$2.28 billion, to acquire US$32 million.

On a more practical level, what it means is that Jamaican parents paying tuition for their charges enrolled in Canadian schools and universities are facing 16-25 per cent higher costs, according to Mark Croskery, president and CEO of Stocks and Securities.

Christopher Chin-Loy also notes that Canadian exports are likely to become more attractive to manufacturers.

Jamaica's country-specific international trade data are lagging by four years, but Canadian exports peaked at US$192 million in 2003, according to central bank figures.

According to analysts polled by Sunday Business, the Canadian dollar (CAD) is one of the best-performing currencies in the world based on year-to-date performance.

The CAD opened the year, at $1.1659 to the U.S. dollar and is currently at an all-time high, said Croskery.

On October 11, the CAD traded at 0.9742 to the USD, he said.

Will not be sustained

However, this movement is not forecast to be sustained in the long run, says economist Damien King, adding that the appreciation in the value is likely to have limited impact on the Jamaican economy.

"The impact is going to be small because the shift in the values of the two currencies, relative to each other, is not large enough to have a noticeable impact on our trading process, neither is the movement likely to be sustained," said King.

Imports from the United States, one of Jamaica's top trading partners, stood at US$1.6 billion in 2003, with that for Canada being about US$98 million, according to figures obtained from the Bank of Jamaica.

Canadian tourists are coming more frequently to Jamaica - recording growth rates of 5.8 per cent over the past five years - but they still make up a small portion of the market, which is 73 per cent dominated by the U.S.

Last year, Canadian arrivals to Jamaica increased by 31.4 per cent, with a total of 153,569 stopovers, in what the Jamaica Tourist Board has called "an incredibly good year" for its Canadian market.

The duration of their stay, 12 nights on average, also outpaced the overall market average of 9.8 nights.

The more the currency appreciates, the bigger the earnings for Jamaica from that market, assuming the visits and rate of stay do not decline.

The Canadian economy has been growing strongly.

"Being a resource-driven country and with the current stage of booming commodity markets, the CAD continues to see appreciation in its currency due to massive inflows and foreign direct investments in these current upward trending sectors, heavily based in Canada," said Croskery.

With this, a great deal more interest has been generated towards investments in Canadian- denominated funds as investors try to hedge against a decline in the value of the U.S. currency.

Not switching dominated funds

Locally, however, no evidence of switching from U.S.-denominated funds to Canadian dollar has been exhibited, but analysts say the possibility exists.

Many financial institutions now offer Ray Chang's CI Investment suite of mutual funds, that allow clients to diversify their investment portfolio beyond Jamaican instruments into USD or CAD currency.

"If CAD currency was chosen, an investor would currently be sitting on 19.68 per cent gains," year to date, said Croskery.

He adds that if the fund chosen was similar or linked to the S&P/TSX Index, which is up 11.26 per cent, then the investor would be seeing a total return of approximately 31 per cent.

sabrina.gordon@gleanerjm.com